CANADA FX DEBT-C$ reverses slide, back above 93 US cents

Wed Aug 5, 2009 1:40pm EDT
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 * C$ moves comfortably off overnight low
 * Bond prices pinned lower across curve
 (Recasts with rise in C$)
 By Frank Pingue
 TORONTO, Aug 5 (Reuters) - Canada's dollar erased an early
fall and gained against the U.S. dollar on Wednesday as its
resilience in the face of a warning against undue appreciation
by Canadian Finance Minister Jim Flaherty prompted renewed
 Flaherty's comments on Tuesday yanked the currency down
from its highest level in 10 months. But the impact did not
last. [ID:nN04143584]
 At 1:15 p.m. (1715 GMT), the Canadian unit was at C$1.0699
to the U.S. dollar, or 93.47 U.S. cents, up from an overnight
low of C$1.0785 to the U.S. dollar, or 92.72 U.S. cents.
 "Just the fact that the pullback was not necessarily as
high as some people were expecting, and that's probably what
brought some more (U.S. dollar) selling into the market today,"
said J.P. Blais, vice president of foreign exchange products,
at BMO Capital Markets.
 "As history has shown us, whenever we have a finance
minister with loose lips trying to come out and help the
dollar, it's never been very successful in the medium term."
 Blais also said the Canadian dollar was avoiding extended
losses because of relative steadiness on equity markets and in
prices for oil and commodities, often key influences on the
 Flaherty's comments, which followed Bank of Canada remarks
last month that it stands ready to take further action to
stimulate the economy, had an immediate negative impact on the
Canadian currency that extended into the overnight session.
 Respondents in a Reuters poll released on Wednesday said
Canada's dollar will steadily back off the 10-month high
reached earlier this week due to talk of central bank
intervention and possible U.S. interest rate hikes.
 Canadian bond prices remained under pressure as European
data helped further hopes that global economic recovery is
gaining steam, taking interest away from safe-haven assets such
as government debt.
 Reports showed the deep recession in the euro zone services
economy eased in July, while Britain's services sector posted
an unexpected surged in the same month, fueling hopes the
economy might have started growing again. [ID:nLAG003649]
 The two-year Canadian bond was down 4 Canadian cents at
C$99.06 to yield 1.463 percent, while the 10-year bond lost 5
Canadian cents to C$101.75 to yield 3.537 percent.
 The 30-year bond fell 25 Canadian cents to C$116.15 to
yield 4.029 percent. In the United States, the 30-year Treasury
yielded 4.457 percent.
 (Editing by Peter Galloway)